This week, a delegation from SAGIA will be in Dubai to participate in Cityscape Global – one of the world’s leading real estate investment and development events. We will be there to meet with investors from around the world and discuss the opportunities available in Saudi Arabia – and we have already seen considerable interest.
The real estate market in Saudi Arabia is changing rapidly. Demand for housing is rising as a consequence of a large, growing population and this is expected to continue in the coming years. The growth in the market is being further supported by recent reforms aimed at enhancing access to mortgage finance. At the same time, the government is undertaking a number of initiatives to increase the role of the private sector in meeting this demand.
The demand for housing in Saudi Arabia is significant. The Kingdom is home to 21 million Saudis – to put this in a regional context, the combined national population of the other GCC countries is 7 million. Moreover, two thirds of Saudis are under the of 34 and population growth is anticipated to outpace global averages over the next decade – which is likely to underpin significant demand in the decades to come. Saudi Arabia also has a large middle class, with 68% of the population classed as middle income and an average monthly wage of $2,690.
Historically, much of this demand has been met by local developers and the public sector. However, recent reforms – undertaken as part of the broader economic transformation envisaged in Saudi Arabia’s Vision 2030 – are changing that picture, with the private sector and international investors having a much larger role to play.
The reason for these reforms is clear when you look at the ambitions that the Ministry of Housing has set out. It aims to increase home ownership from a baseline 47% to 60% by next year and 70% by 2030 – requiring the creation of an additional 1.2 million homes. While the government will still have a role to play, it is clear that in order to reach these goals it will be vital to enable to tap into the capacity and expertise of the private sector.
Indeed, accessing the innovation and expertise of international investors are key elements of Saudi Arabia’s plans for the real estate sector. Currently, the sector has focused on traditional delivery methods – however, the scale of our ambitions means we need to be able to build more quickly, at a higher quality and at a lower cost. This means adopting new 2D and 3D building systems that can accelerate the development of new projects.
The government has introduced a range of financial and non-financial incentives to support new technological developments – including matchmaking, business support and loans with preferred terms.
These efforts to support international investment in the real estate sector reflect broader reforms across the economy. It is still early days in the reform program, but the initial evidence suggests that the changes taking place have succeeded in attracting the attention of the world’s investors.
For example, in the second quarter of 2019, the Saudi Arabian General Investment Authority (SAGIA) issued nearly 300 new foreign investor licenses. That is the equivalent of five new licenses a day and more than double the number issued in the same period the year before. It also meant that the number of licenses had grown for the fourth quarter in a row.
Likewise, alongside growth in the number of companies establishing in Saudi Arabia, the level of foreign direct investment has also grown – in 2018 it was 127% higher than in 2017.
We are very excited about the potential for the real estate sector to play a major role in that growth in the years to come. If you are interested in being a part of it, we look forward to hearing from you and discussing how we can help you – whether this week at Cityscape Global or in the months to come.